Dollar v. Land

• Citation: 154 F.2d 307,81 US App. DC 28
• Decision Date: 18 March 1946
• Docket Number: No. 9168.,9168.
• Parties: DOLLAR et al. v. LAND et al.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

81 US App. DC 28, 154 F.2d 307 (1946)

DOLLAR et al. v. LAND et al.

No. 9168.

United States Court of Appeals District of Columbia.

Argued January 19, 1946.

Decided March 18, 1946.

Mr. Gregory A. Harrison, of San Francisco, Cal., pro hac vice, by special leave of Court, with whom Mr. Clinton M. Hester, of Washington, D. C., was on the brief, for appellants.

Assistant Attorney General John F. Sonnett, pro hac vice, by special leave of Court, with whom Messrs. Edward M. Curran, United States Attorney, Paul D. Page, Jr., Solicitor, United States Maritime Commission, and Ellis Lyons and Harry I. Rand, Attorneys, Department of Justice, all of Washington, D. C., were on the brief, for appellees.

Before CLARK, WILBUR K. MILLER and PRETTYMAN, Associate Justices.

CLARK, Associate Justice.

This action originated with a complaint filed by the present appellants in the District Court on November 6, 1945. The complaint prayed for relief by way of injunction and mandamus against the defendants, members of the United States Maritime Commission, as individuals. It was alleged that the defendants were about to sell certain stock held by them in derogation of the plaintiffs' asserted legal right to the securities.

Upon the filing of the complaint a temporary restraining order was granted against the defendants. The plaintiffs moved for a preliminary injunction, pending suit, and it was in response to this motion that the defendants, appellees here, came forward, submitting brief, affidavits and arguments embracing these defenses: (1) that the suit was in fact one against the United States without its consent, and therefore, the court was precluded from entertaining it; (2) that the complaint failed to state a cause of action because under a contractual agreement entered into in 1938 the stock in question was unconditionally and absolutely transferred to the United States. Further it was asserted that the plaintiffs because of their conduct, both at the time of contracting and subsequently, are not now free to challenge the validity of the contract.

Defendants, however, did not answer or move for a dismissal or summary judgment. The proceedings below went only to the motion for a preliminary injunction. After twice hearing the parties the District Court dismissed the complaint on its own motion and denied the temporary injunction. It appears from the briefs filed in this court that the parties, during the course of their argument on the plaintiffs' motion for a preliminary injunction, may have placed before the lower court most, if not all, of the substantive elements necessary to a decision on the merits. However, with only the aid of the record now before this court we are not free to review the case on the merits.

The controlling fact at this stage of the litigation is that the complaint was dismissed below. Some assistance in determining the basis for the dismissal is found in the order itself and in this portion of the transcript from the lower court: "I have given this case a lot of thought, and I am ready to decide it now. I appreciate Mr. Harrison's argument very much. It does not, however, change the view that I have reached in my study of it. And I may be wrong, but I think two things. One is that this transaction was legal, in the sense that the Commission had the legal right; and therefore I think it is inescapable that this is a suit against the United States and therefore that the complaint must be dismissed and the injunction dissolved."¹

The order of dismissal indicates that the court had considered all of the offerings on both sides, and the transcript of record bears out the appellees' contention that appellants, plaintiffs below, regarded the proceeding as pointing toward a final determination on the merits. Counsel for the plaintiffs said:

"It is our belief that there is no real dispute upon the facts. It is our belief that this raises really a question of law.

"The plaintiffs are conscious of the desire for an early disposition of this cause and they join in that desire; and they suggest to counsel for the defendants that the parties agree that this hearing may be deemed a hearing upon the merits of the case, and that a final decree, instead of an interlocutory injunction, may be rendered at this time."²

Nevertheless, regardless of the light in which the parties, and perhaps the lower court, may have viewed this litigation, we are unable to say that the record on this appeal gives us license to review the complex and important substantive issues involved. We are constrained by the nature of the District Court order. The ground for the dismissal was jurisdictional, that is, the suit was deemed to be one against the United States without its consent and therefore not maintainable.

The complaint having been dismissed on the court's motion, the question for our decision is whether the allegations found therein, when taken as true, constitute ground for relief under any set of facts that could be proved to support the claims. This question must be answered not only by looking to the complaint itself, but also by reviewing the doctrine of sovereign immunity which appears to have controlled the decision below.

Turning to the complaint, we find these illustrative allegations:

"23. That accordingly acting under the intimidation and threat of bankruptcy and the inability to meet its obligations, including obligations to the United States itself, the company was involuntarily forced to and did enter into said contract of August 15, 1938, a full, true and correct copy of which is annexed hereto

"29. That, although such transfer was in fact and in legal effect collateral security for the indebtedness of the company to the United States Maritime Commission, nevertheless after the satisfaction of all of said debts and obligations to the United States, the defendants have asserted and claimed, and do now assert and claim that the United States is the lawful owners of the shares of stock so transferred by the plaintiffs to the United States Maritime Commission.

"30. That, the indebtedness of the company to the United States for which said shares were transferred as collateral security, amounted to approximately $7,500,000 in principal amount, all of said amount having been fully satisfied and accordingly the indebtedness for which the stock has been transferred as collateral no longer exists.

"31. That, the contract between the plaintiffs and the United States Maritime Commission was unauthorized and prohibited by express provisions of the Merchant Marine Act of 1936, as amended.

"32. That, said contracts therefore are unenforceable, that no legal rights of either party could be effected under said contracts, that said contracts are void for all purposes and effects, and that the United States Maritime Commission could not acquire legal title to the plaintiffs' stock pursuant to the terms of the illegal agreements."

Considering these allegations for the moment without regard to the question of sovereign immunity, we think they state a "claim" which, if proved, entitled the plaintiffs to relief. Whether the motion to dismiss be initiated by the defendant or by the court, it can stand "only where it is clear and apparent to the court that the plaintiff would not be entitled to relief under any state of facts which could be proved in support of the specific claim."³

Viewing the complaint in the light of the argument before this court and the exhibits attached to the briefs presented here, the fundamental issue is drawn into sharp focus. Appellants contend that the 1938 contract represented nothing more than a pledge of the stock. This position is founded on two arguments: (1) the Commission was without authority to acquire absolute and unqualified title to the securities, and (2) the terms of the contract, and the circumstances under which it was entered into, require the court to interpret it as a security transaction. The debt originally owing the Commission has now been paid. Hence, if appellants' contention be correct the United States now has no interest in the collateral. As appellants argue, the terms of the contract seem in some respects to be more consonant with the theory of pledge than that of outright transfer. For example, it was specifically provided that appellees should acquire some 90% of the voting control of the company and have the power to sell the securities acquired. Neither of these conditions would appear necessary if the transfer was intended to be absolute. Further, some of the language used in the Commission's press release of July 6, 1943, tends to illustrate the genuineness of the "claim" which appellants are asserting. In announcing that it was considering the "possibility of bringing about private ownership of the American President Lines" the Commission's release said: "Some of the debts of the Company were covered by debentures and preferred stock, and the Maritime Commission, to protect its interests and insure continuation of service, came into possession of 80 per cent of the common stock. Although the Commission had full voting control, it caused the Company to be operated by a Board of Directors which included representative local interests of San Francisco and former creditors of the concern." (Italics added.) It would thus appear that perhaps the "possession" acquired by the Commission to protect its "interests" was, as appellants urge, nothing more than a bargain by which there was a substitution of collateral resulting in strengthening the Commission's position by reason of the management control inextricably bound to the transferred stock. We have no finding or conclusion from the trial court on this basic issue which we believe must be tried.

The appellees point out that the complaint is inconsistent on its face, that is, the plaintiffs argue first that the contract is without authority in law and therefore void, and second that it is a valid contract and...